B2B companies lead direct marketers in order growth

Compared with direct marketers in four consumer products categories, business-to-business marketers showed the strongest growth by far in customer demand during the fourth quarter—even though B2B companies did not show the highest increase in circulation of paper catalogs and e-mail marketing messages, research and investment banking firm Tully & Holland reports.

Balancing customer demand with the volume of circulated marketing materials can be a difficult task to manage from year to year, and some industries—and particularly business-to-business marketers—have performed better than others in recent years, market research and investment banking firm Tully & Holland Inc. says in a report on its fourth quarter 2013 Demand Index for direct marketers.

“The business-to-business category continued to be the strongest category for the second year in a row,” managing director Stuart Rose says.

Tully & Holland’s most recent Demand Index for direct marketers shows percentages of year-over-year changes both in circulation of direct marketing materials, including e-mail and paper catalogs, and in demand as measured by the number of customer orders.

The index is based on data gathered from companies across five groups: Apparel, Home & Accessories, Multi-Category, Hobby and Business-to-Business.

Overall among all categories, demand in customer orders was up 3.3% in 2013, having remained fairly constant in recent years with year-over-year increases of 3.9% in 2012 and 3.8% in 2011. Overall changes in circulation of marketing materials during those years rose 6.8% in 2013, after dipping by 0.4% in 2012 and inching up 2.4% in 2011.

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The year-over-year changes in customer demand and circulation, however, differ widely among the five categories of companies surveyed. Apparel performed the worst. In 2011, an 11.9% drop in circulation coincided with a 2.5% drop in demand, and in 2012 a sharp increase of 16% in circulation led to a relatively modest 6.6% increase in demand. Then a 6.9% increase in circulation last year coincided in a 3.1% drop in demand. “Given the large increases in circulation [in 2013 and 2012] we would expect profits for some companies in this category to be severely pressured,” Tully & Holland says.

Home & Accessories was the only other category showing a drop in demand last year, at 4.1%, which coincided with a 3.1% increase last year in circulation—the smallest circulation rise among the five categories surveyed. In addition, companies in the Home & Accessories category showed declines of circulation of 4.2% in 2012 and 2.3% in 2011.

In comparison, the B2B category has shown rising demand over each of the past three years—with increases of 2.7%, 9.1% and 11.4%, respectively in 2011, 2012 and 2013—along with varying changes in circulation. In 2011, its circulation dropped by 2.5%, followed by increases of 2.0% in 2011 and 7.8% in 2012.

Tully & Holland didn’t explain the steady and relatively large increases in demand for the B2B category, but the increases coincide with sharply rising B2B e-commerce sales across the United States in recent years. Forrester Research Inc. analyst Andy Hoar “conservatively” estimated B2B e-commerce sales in the United States last year at $559 billion, up from the $403 billion in 2010 reported by the U.S. Department of Commerce. And Hoar and other experts say that the market continues to grow rapidly. Gartner Inc. estimates that annual B2B e-commerce revenue in the U.S. may already be $800 million or more. Driving much of the increase, Gartner analyst Gene Alvarez says, is a shift from ordering through paper catalogs to ordering through B2B e-commerce sites.

Indeed, Rose says that most of the figures on B2B demand and circulation noted in the latest Tully & Holland Demand Index were related to circulation of e-mail marketing messages that solicit orders placed on e-commerce sites as opposed to circulation of paper catalogs.

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Although the index findings alone “are not statistically significant” because of the small sample of 20 companies across all surveyed categories, Tully & Holland says it believes the findings are indicative of actual performance of the surveyed categories because of other research the firm has conducted, Rose says.

In addition to market research, Tully & Holland is also involved in investment banking for several industries, including manufacturers and distributors, consumer products companies and retailers.